Hoeven wants to dump income tax credit plan
The Associated PressBISMARCK (AP) - Gov. John Hoeven wants to dump a state income tax credit for North Dakota property tax payers in favor of his $300 million plan to finance property tax cuts and increase aid to schools, Lt. Gov. Jack Dalrymple says
The proposal would renew some of last year's property tax battles in the Legislature, where a similar Hoeven proposal was rebuffed in part because lawmakers wanted to avoid granting property tax breaks to out-of-state landowners.
Dalrymple told the Legislature's interim Taxation Committee on Wednesday that he hoped the income tax credits would be ''terminated'' after the next tax year. The state Tax Department says the credits are discriminatory, confusing to taxpayers and clumsy to administer.
Hoeven's proposal, which he wants to introduce in the 2009 Legislature, ''would, in essence, become our property tax relief measure,'' Dalrymple said.
''The main difference is that this is a true property tax reduction, and it is not simply a credit against some other form of taxation,'' he said Wednesday.
The Taxation Committee will study the issue further this summer. Sen. Dwight Cook, R-Mandan, who helped draft the income tax credit bill during the 2007 Legislature, said he still favors it as the best way to provide tax relief to property owners.
''I'm sure we'll take a look at continuing this program for another two years, fine-tuning it, so we get rid of some of the problems that we had,'' Cook said.
Last year, the Legislature approved granting North Dakotans an income tax credit equal to 10 percent of their local property tax bills. The credit was limited to $500 for individuals and $1,000 for married couples.
In adopting the measure, lawmakers turned down Hoeven's plan to offer 10 percent annual property tax discounts for homeowners for two years and 5 percent cuts for owners of agricultural and commercial property.
Property owners who do not live in North Dakota do not qualify for the income tax credit. North Dakotans who own property through a trust, farm corporation or farm partnership also are not eligible, the Tax Department says.
Hoeven's new property tax measure has not yet been drafted as legislation. Dalrymple said Wednesday it would benefit all property owners - including those living out of state - by providing school districts replacement funds if they agreed to cut their property taxes.
School districts should be able to use the state money infusion to cut their property tax rates by an average of 55 mills, Dalrymple said.
North Dakota's schools have a statewide average general fund tax rate of almost 191 mills. The general fund provides operating money for schools, including funds for teacher pay and benefits and school supplies.
For a house worth $150,000, a reduction in the property tax rate by 55 mills - say, from 191 mills to 136 mills - would decrease the homeowner's property tax bill from $1,289.25 to $918, a reduction of 29 percent.
Dalrymple said the proposal likely would be coupled with limits on property tax rates to keep them from creeping upward again. North Dakota law now has a 185-mill ceiling on schools' general fund property tax rates, although some districts have higher levies.
Hoeven's new plan earmarks $200 million to finance local property tax cuts, which is more than legislators estimated the two-year income tax credit initiative was worth. Lawmakers assumed it would result in $115 million less in tax collections over two years.
Rep. Merle Boucher, D-Rolette, who is the House minority leader and the Democratic candidate for lieutenant governor, said he was skeptical about whether Hoeven's proposal could be sustained.
''How do people have any assurance that this is going to happen for more than two years, that it's not going to be yanked away from them?'' Boucher said. ''You could be looking at some big property tax increases in the future.''
Dalrymple said he and Hoeven were confident the state treasury could sustain disbursements to schools to keep property taxes down.
''We have analyzed this in the governor's office, we think, very carefully over multiple bienniums ... and we believe that the funding is available, it is absolutely sustainable,'' Dalrymple said. ''It is obviously a leap forward, but we think we can maintain it over time.''
